Niall Ferguson: Rough Week, But America's Era Goes On

[Niall Ferguson is a professor of history at Harvard University. His latest book, "The Ascent of Money: A Financial History of the World," will be published in November.]

... We are living through the end of a phenomenon that Moritz Schularick of Berlin's Free University and I christened "Chimerica." In this view, the most important thing to understand about the world economy over the past 10 years has been the relationship between China and America. If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world's land surface, a quarter of its population, about a third of its gross domestic product and somewhere more than half of global economic growth in the past six years....

With China decoupled from the United States -- relying less on exports to America, caring less about the yuan's peg to the dollar -- the end of Chimerica seems nigh. And with the end of Chimerica, the balance of global power is bound to shift. No longer so committed to the Sino-American friendship established back in 1972, China can explore other spheres of global influence, from the Shanghai Cooperation Organization that groups together China, Russia and four Central Asian nations to China's own nascent empire in commodity-rich Africa.

But commentators should always hesitate before they prophesy the decline and fall of the United States. America has come through disastrous financial crises before -- not just the Great Depression but also the Great Stagflation of the 1970s -- and emerged with its geopolitical position enhanced. Such crises, bad as they are at home, always have worse effects on America's rivals.

The same is proving to be true today. According to the Morgan Stanley Capital International index, the U.S. stock market is down around 18 percent to date this year. The equivalent figure for China is 48 percent, and for Russia -- the worst affected of the world's emerging markets -- it is 55 percent. These figures are not very good advertisements for the more regulated, state-led economic models favored in Beijing and Moscow.

Moreover, because investors continue to regard the U.S. government's debt as a "safe haven" in uncertain times, the latest phase of the financial crisis has seen the dollar rally, rather than sag further.

Of course, this could yet prove to be the safe haven's last gasp, especially if U.S. authorities are unable to avert a fresh wave of bank failures in the days ahead. Nevertheless, the caveat is clear. The hubris of recent years has certainly been followed by a terrible financial nemesis. But it is much too early to conclude that the American century is over. Like so much else made in the United States, this nemesis is proving an all-too-successful export.